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Apartment letting legislation inadequate and inflexible says lawyer

15 June 2017 - By Craig Stephen

A property lawyer says the current legislation around apartments and complexes letting out their units for short stay accommodation such as Airbnb’s which attract Lions rugby fans, needs to be more robust.

“The Unit Titles legislation, which was only reformed in 2010, is in my personal view, wholly inadequate,” says John Greenwood, a partner at Wellington firm Greenwood Roche and the editor of the NZLS Property Law Section’s The Property Lawyer magazine.

Photo of John Greenwood
John Greenwood

“It is just not flexible and responsive to deal with the myriad of problems created by dysfunctional body corporates. The purpose statement of the Unit Titles Act says it is responsive to and flexible, but it certainly isn’t, in fact, it is almost the opposite of that.

“There isn’t enough flexibility in the Act for people to impose more robust rules. I also think education is one of the missing tools here, plus there hasn’t been any decent research on apartment living in New Zealand. It’s a major growth area, Auckland alone is going to have half a million people living in apartments by 2035,” Mr Greenwood says.

He says there are rules in body corporate agreements, particularly relating to noise and nuisance. But the issue with Airbnb rules, where units are let on a temporary basis, is that they operate “like quasi-hotels” with people coming and going constantly.

“You are upsetting the dynamic of a normal apartment living arrangement,” he says.

“There is a risk of opening up your apartment complex to a quasi-hotel/motel type arrangement; you’ve got a whole lot of different people in there who will be strangers to the normal occupiers. When you buy into these complexes you think everything is going to be great, but then they keep changing because issues like letting out short stay accommodation to rugby fans.”

As well as temporary letting there are issues around pets and even instances of properties being used to provide sexual services, which is governed by planning laws which control uses of buildings.”

Lions rugby fans in apartments

With accommodation limited for the current tour of New Zealand by the British and Irish Lions, ingenuitive homeowners, and perhaps, tenants, are letting or sub-letting their homes for inflated prices, which is not surprising.

“That’s not governed by the Unit Titles legislation and the city councils have no by-laws nor planning laws around Airbnbs, they can impose changes through the Building Act in terms of if they decide that the Airbnbs are a business operation, so they could say there’s a change of use from normal residential use, and they could impose fire compliance type issues, such as smoke alarms and/or disability toilet areas in all rooms.”

“But then how do they even know that are operating as Airbnbs?”

Mr Greenwood says the powers that body corporates do have are limited.

“Body corporates can impose strict rules – but they can’t say you can’t operate as an Airbnb; that would, in my view, be unlawful in terms of the Unit Titles Act. And where it gets really tense is, where you have a block and it becomes dominated by Airbnbs, that in effect changes the whole use of that block and make it more or less a commercial operation.

“Apart from the Building Act compliance issues, you have tax issues as well to worry about, and there might be issues over insurance cover. Insurers may take the view that, because it’s commercial use and not purely residential, that the insurance premiums will be much higher than if it was ordinarily residential use.”

Mr Greenwood also notes, in his editorial column of the June 2017 of The Property Lawyer, the only areas where there could be some restrictions on tenant use, short-term stays or couch surfing is on apartments operating under a company share regime, governed by occupational licenses or leases. “Owners commit to a regime through bespoke personal contracts, company constitutions and the provisions of the Companies Act 1993, rather than a ‘one-size-trying-to-fit all’ statutory regime,” he writes.

Mr Greenwood feels part of the problem of apartment living is that New Zealanders are relatively new to the concept, unlike in some western countries, and people tend to think they “live in their own castle” whereas such blocks have communal areas, and there needs to be consideration for others.

Last updated on the 15th June 2017